Dear Steemian!
We know that the traditional financial system sucks. It siphons money from the pockets of the poor and increases wealth of the rich. Some people see cryptos as a medium which can break into this system and free common man from the clutches of the greedy banking system. Every crypto enthusiastic would like to hear cryptos replacing fiats and become a worldwide acceptable medium of exchanges. But will this dream become possible? Will cryptos replace fiats?
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We need a practical approach to compare cryptos with fiats. Mere suppositions cannot take place of reality. Cryptos have many flaws. Without removing those flaws, the road of success for cryptos will always be bumpy. In this post I’ll try to analyze problems which can hamper the progress of cryptos in achieving the feat of taking place of fiats.
Problems with cryptocurrencies.
Difficulties in buying and selling.
At present many cryptocurrency exchanges are providing cryptocurrency transactions. But for a common man crypto trading is still a tedious job. Few people are aware of cryptos and those who are aware, fewer of them fully understand the system of crypto trading; and many of those who understand how crypto trade is made, are uninterested in buying or selling of cryptos. Crypto trade is still in a nascent state. It takes fiats to buy cryptos. Crypto exchanges charge high transaction fee for trading and transferring and are also subject to frequent hacking. They also solicit Know Your Customer (KYC) requirement to open an account with them. Hence, transaction with them is not free from sharing of users’ personal data with third parties.
Too many cryptocurrencies.
Every country has its own currency which is issued and protected by the government. Countries allow only a single currency to operate inside their borders. Governments provide assurance to the users of these currencies and also people put high faith on them. Till now, there are over 1500 cryptocurrencies available worldwide (while fiats are not over 180) which is making it difficult for people to choose and accept them as a medium of exchange due to uncertainty and lack of faith in them. Too many cryptos are making it tough for the users to select suitable cryptos to work with.
Not truly decentralized.
Cryptocurrencies are not decentralized as they are being depicted. For example as the block size of Bitcoin is increasing day by day, mining also becoming tougher day by day. It takes a lot of computing power to mine a block. It takes a lot of money and requires enormous energy supply to mine a block. Only rich people can venture into mining business. Within a few years it will be impossible for a single person to mine a block. They would need giant corporations to perform this task.
Even non-mineable cryptos like Steem etc. are not free from this problem. In Steem whales have millions of Steem while others struggle to earn a few dollars worth of Steem.
Hence, the rising cost of mining will make rich richer and allow big corporations to rule crypto world. Corporate will occupy mining nodes everywhere and cryptos will no longer stay decentralized then. This will be a highly centralized compared to the traditional financial system and hence, will be a new tool of slavery.
Utility of cryptocurrencies.
People use only a single currency within their country. They don’t use that currency for investment. Instead of it they use it for the transactions purpose only. They don’t have to pay transaction fee when they pay in cash. Cash payment is instant while crypto payment takes time to confirm a transaction till the block is approved. Till then both the buyer and the seller cannot be sure whether payment is made.
We don’t think in fraction.
We can send any recognized amount in cash to anybody but a certain limit exists for cryptos. One cannot transfer an amount lower than a certain limit. We are human beings who don’t think in fractions. Digits over two decimal points make matter complex for us. One knows for buying a certain chocolate, 50 cents are enough but paying through Bitcoin will require 0.00008064 BTC (@ $6200). Can one remember such a small fraction? Even a slight change in that fraction will change the value of the chocolate considerably.
Cryptos, whose supply is in trillions or more will also face transaction limitation problem. How can one assume that what will be the size of the world economy after so many years, and how many crypto coins will be required to handle every transaction so that people don’t have to face problem with too many decimal points?
Volatile price.
Cryptos’ price is very volatile. Their price can fluctuate 10%, 20% 50% or more in hours. This instability of crypto price confuses users for whom the determination of the exact value of the exchange becomes a headache. You received cryptos for selling goods someday and on next day its value remained only one fourth, what will you do in this situation? Can you trust this highly volatile payment system? I think fewer can take risk to buy or sell with cryptos in such a situation.
Need of the active internet connection and devices.
One should not forget that transaction of cryptos and other digital money (including digital fiats) requires mobile or PC with the active internet connection. In a world where a big population of poor and illiterate persons lives, such technologies become an unaffordable luxury for many. Besides this, electricity supply is also a big problem in developing countries. If someone accidently or intentionally go to a place where mobile signals are not available or mobile gets switch off due to low battery, how will he pay his dues? Or if a powerful solar eclipse damages power system and renders electronics non-operational, will the global financial system not become standstill?
Lack of support in case of financial crisis.
If cryptocurrencies become the only means of exchange, what will happen in case of a financial crisis? As there will be no central authority to assure people in such a situation, any such crisis can collapse the entire world economy at once.
In case of failure of fiats, governments assure people to help them to some extent but in case of failure of cryptocurrencies, there will be no authority to help people because full expansion of cryptos will bring the anarchy and make governments powerless.
Danger from governments and traditional financial system.
The danger of governments’ wrath is inevitable for cryptocurrencies because governments cannot afford their authority and sovereignty to be damaged by anything. Banks also won't allow cryptos to destroy their business. Governments will take repressive action if they feel threatened by the decentralized system of the blockchain technology and cryptocurrencies. They already have started regularizing cryptocurrencies market or mulling over to issue their own cryptocurrencies to get rid of the danger possessed by the virtual currencies in time. Government owned and controlled cryptos though; they won’t be decentralized but will be adopted by the public because public usually have immense faith on the governments instead of any unknown entities.
The future.
Once the governments issue their virtual currencies, people will take them as hot cakes. Government owned cryptos will begin an era of the government supremacy which will make everyone a slave. This danger is not baseless. This world is already reeling under the pressure of overpopulation which is causing destruction of environment and possessing a danger of elimination of all life forms from the face of the planet earth. Innovative robotics and automation techniques are rendering humans jobless.
Hence, the world population will become a burden which will need a control in case of chaos caused by newer technologies. So, the wealth will become necessary at first as it will guarantee against the suppression and exploitation. Eventually, wealth will become worthless as nobody will sell or buy anything because the masses will not have resources for those transactions.
After analyzing these possibilities I can say cryptos cannot replace fiats. In fact governments will issue its own cryptocurrencies to counter this threat.
However, present cryptocurrencies will see a dramatic change and will stay secondary options with people as the means of exchange. I know many people won’t agree with me but I am rather skeptic and worried. Cryptocurrencies have a huge potential but they have their own limitation and without addressing inherent problems associated with them, their future will always be uncertain. Electronic transactions have many benefits and uses. But, it should be kept in mind that cash is the safest and the most anonymous way of exchange which does not require disclosing one’s own identity. Till now, cash transaction is the most flexible and instant.
So, I can say future of cryptos will change but crypto can never replace fiats. As much as they can just be little partners of the fiats.
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Thank you. Your opinions is very important for me. Please comment, if you like.
Love you all.
@akdx